By Kavya Guduru
(Reuters) – Gold edged up on Wednesday as the dollar slipped, but expectations for steep rate hikes from the U.S. Federal Reserve took some sheen of the precious metal and capped its gains.
Spot gold rose 0.1% to $1,702.90 per ounce by 11:57 a.m. ET (1557 GMT) after marking its biggest one-day percentage decline since July 14 on Tuesday, driven by the dollar’s rally following a surprise rise in U.S. inflation.
U.S. gold futures fell 0.2% to $1,713.30.
“Gold could potentially stabilize and right now, the markets are still kind of digesting that inflation report, but it seems that $1,700 level is holding – that’s key for gold,” said Edward Moya, senior analyst with OANDA.
The dollar fell 0.3%, making greenback-priced bullion less expensive for overseas buyers. [USD/]
Markets are now pricing in a rate hike of at least 75 basis points by the Fed at its Sept. 20-21 policy meeting, following an unexpected rise of 0.1% in the U.S. consumer price index for August. [FEDWATCH]
Gold is considered a hedge against inflation, but higher rates to tame rising prices dim appetite for the asset since it bears no interest.
“After the FOMC meeting, (the Fed) might also lead markets to believe they could still remain that aggressive … that’s lights out for gold. (If) $1,700 breaks, then we’re looking at not much technical support … that’s the day where you might see gold fall $50 or even more,” Moya added.
Spot silver rose 1.5% to $19.61 per ounce, platinum gained 3.4% to $908.49, and palladium added 2.7% to $2,160.53.
“The PGMs (Platinum Group Metals) are likely to bounce back in the coming months as auto production recovers but we remain cautious given the risk of recession that is likely to cap the upside,” Standard Chartered said in a note dated Tuesday.
(Reporting by Kavya Guduru in Bengaluru; Editing by Krishna Chandra Eluri and Vinay Dwivedi)
